The Gulf Cooperation Council (GCC) decided to introduce Value Added Tax (VAT) in the six gulf countries – Bahrain, Kuwait, Oman, Saudi Arabia, Qatar and the UAE. With the VAT, a refund scheme has also been introduced. For details, read on.
Concept of VAT:
VAT is an indirect tax, which is determined by the value of the item at various stages of production, distribution and sales. In GCC 5 per cent flat VAT is applied on most of the goods and services, except a few that have been exempted from its ambit. The GCC has designed a scheme for the business visitors, who have been allowed to claim back VAT on incurred expenses. The Federal Tax Authority (FTA) has declared that foreign businesses can claim back the VAT incurred on some services. According to the Finance department, businesses will be able to reclaim VAT on car rentals, hotels, conferences, exhibitions and training courses. Also, services like consulting, marketing, and legal fees will, in all likelihood, not attract VAT.
What is VAT refund?:
All the registered businesses are necessarily required to furnish a VAT return, providing the details of sales, purchase, input VAT and output VAT during the financial year. Input tax refers to the amount paid to the suppliers towards purchases or expenses while output tax is, the amount collected on the sales. VAT rules allow the eligible input VAT amount to be adjusted against the output VAT amount. In such scenario, two conditions will emerge ; if output VAT amount is higher than the input VAT, the balance will be the amount payable to FTA. This is payable VAT. VAT refundable means, when the output VAT amount is lesser than the input VAT, the excessive balance will be refundable.
How to treat refundable VAT:
The drafted VAT laws allow the tax payer to avail any of the below two options in treating the excess input tax, which is commonly known as tax refundable,
The tax payer has the eligibility to request for a tax refund.
If the tax payer does not wish to request for the excess input tax refund, the recoverable tax can be carried forward to subsequent tax periods. He is also allowed to apply for the tax refund at any point of time in future. The tax amount is also allowed to offset against the payable tax and/or penalties.
How to claim refund of tax:
If you’ve excess input VAT, an option will be available on the VAT return for the VAT refund. For the purpose, you’re required to submit the VAT refund application, after submitting VAT return. Using your user name and the password, you are required to log in to the FTA e-service portal, and now to access the refund form, navigate to VAT tab and then to the VAT refund tab. If you’re looking for VAT refund services in Dubai, get connected to VAT Accounting, a prestigious name in the profession.
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